Well That Was Interesting

I'm not sure what this morning's slap-down was all about, the only indications other than the IWM/Russell 2000 ones mentioned in the A.M. Update where one of the first assets I looked at on the open, High Yield Credit which has been up the last several days and thus leads the market, but hasn't had any divergence, in line at the best. However this morning it gapped down and was implying (strongly) risk off, no one wants to get caught long when the music stops which is one the of the reasons I don't trade against a stage 4 decline unless I have a darn good reason which I haven't had.

 HYG is in green on this 1 min chart showing the gap down this morning and on volume. In red is the SPY following it to the downside.

Remember there's no "Gas in the tank" with HYG, it has been in line at best, although it has moved up the last several days and its price movement is what draws the market or influences the market. It appears that the smartest of smart money is taking risk off the table.

The actual sell-off wasn't all bark and no bite, there was plenty of bite as you can see the NYSE intraday TICK trend from late yesterday and continuing in to this morning hit levels of extreme readings deeper than -1550, that's a lot of stocks selling off, not just weighted ones.

 The Q's and the SPY to some extent still have gas in the tank, but as I have said since first expecting a bounce Tuesday, be careful with volatility at a fear stage, divergences can be run over pretty quick although not that often, much more often than any other stage, again another reason I don't trade against the charts or the stage in the cycle.

 ES intraday gave no hint of a negative divegrence, but did confirm the move lower.

 TF 1 min does look to be leading a bit more, but overall that's downside confirmation, in other words as TICK shows some real selling and quite impressive, reminiscent of last Friday.

 As mentioned earlier, TF/Russell 2000 futures look like they are nearly spent, not just from a price chart perspective as shown in the A.M. Update this morning, but from a 3C chart perspective as well.

The 7 min ES has a small divergence, but otherwise has been in line.

I'd say there's still gas in the tank overall in QQQ and SPY with what I've expected, a Russell 2000 transition or rotation to the downside.

I have a feeling this is morning madness, the typical games in the morning, I'm not ready to jump to conclusions based on a strong sell off this early, but I'm also not blowing it off.

More as soon as I have it. The bottom line though remains, I still expect us to continue significantly lower as we are in a stage 4 decline area with tons of confirmation, it's just a matter of when and where. For core short positions, it shouldn't make too much of a difference.